An arch-capitalist has launched an assault on Key’s government, and it feels like a huge moment

Strident remarks by Stephen Jennings, one of New Zealand’s wealthiest citizens, on housing, education and the economy suggest that the even the business community is tiring of the government’s endless softly-softly, writes Duncan Greive.

Over the past few days we’ve seen a startling insertion into the public discourse of Stephen Jennings, a relatively low profile businessperson with a deeply unpalatable message for the government. Startling because Jennings was one of the key backroom figures of our economic reforms of the 80s, bearing witness to our privatisation frenzy then taking those lessons to a far bigger big stage in the collapsing Soviet Union. A number of westerners wandered into the chaos of post-communist Russia. More came out in body bags than, like Jennings, as billionaires.

It’s fair to say that any outsider making that kind of money in that era could not have done so without tremendous reserves of will, guile and courage – in Russia then as now businesses were dispossessed of their owners by various means, murder was rampant, the political situation was something to be ridden, not relied upon.

Then he moved into Africa, a continent replete with opportunity but the match of 90s Russia as far as risk goes. All this tells you one thing: that Stephen Jennings is an arch capitalist – a man who knows how money is made, how it moves, what it requires to stay in motion.

So the fact he has chosen now to harshly critique this government’s economic management has a real sense of moment to it. He gave a speech to rightwing thinktank the New Zealand Initiative last Thursday, then repeated the comments to the Weekend Herald’s Christopher Adams and again to Corin Dann on Q&A on Sunday. Collectively they had they air of a calculated assault on the government’s narrative, from someone who might previously have been considered a reliable partisan.

A brief summary from his interview on Q&A:

“[Our] growth numbers are inflated by immigration.”

“Our education system is clearly deteriorating very rapidly, and the equity of the education system is declining.”

“Our housing problems are very serious. They’re efficiency issues, but they’re also income distribution issues.”.

“If it was easier to have greater density and greater height the issues would go away very quickly. They’re not fundamentally complex issues.”

In some ways more impactful than his cogent analysis of the individual symptoms was his warning about their cumulative impact: “It’s very, very clear that we have a set of issues, that if we don’t address are going to cause major problems,” he said, “including the kind of chaos and lack of intelligent discourse you now see in the US and the UK.

“We’ve got the opportunity to get in front of those issues. And those are issues which cut across left-right divides. But if we don’t get in front of those issues, the chickens are going to come home to roost.”

What’s fascinating and instructive about this analysis is clearly its origin: any number of commentators have been diagnosing similar problems. But, as Fran O’Sullivan pointed out in her excellent analysis, Jennings is someone who would be expected to be naturally sympathetic to the government’s responsive incrementalism. That could embolden other business leaders to be more forthright in their own critiques, which might finally force National to play defence in a way that opposition attacks have never really proven capable of doing.

Because the business sector should be furious about the housing crisis. There’s this idea, still depressingly prevalent in certain sections of the left, of the rapacious capaitalist who never rests until they’ve wrung every last drop from the defenceless proletariat. It may not be routinely expressed in those terms, but it remains the concept underpinning many people’s understanding of the business sector’s relationship with society.

While it’s rhetorically attractive, and a fun bogeyman to rail against, most (though by no means all) business people understand that a grossly unequal society is fundamentally terrible for their enterprise. Because the one percent are terrible at spending money, whereas the country’s poorest lack the luxury of saving it. Which means that a dollar swung toward the richest New Zealanders simply takes that dollar away from a system which it might be competed for by all businesses, and into an opaque world where it might head overseas, into a commodity or a bond or a trust – oftentimes never to return.

We’re seeing that happen to a far greater extent in housing, which is why it might yet become the business problem which unseats this government. We’re living through a decade of near zero wage inflation, a reality which is clearly the new normal in the west. When you plug that scenario in to rampant house-price and (to a lesser extent) rent inflation you essentially transfer billions of dollars out of the field of play, where all New Zealand businesses might compete for them, and into a housing sector, from which a comparatively tiny sector of people benefit.

That is to say that every dollar we spend on servicing mortgages or paying rent is one we can’t spend on mobile data, or shoes, or dinner. It’s a dollar which leaves the vibrant part of our economy for the moribund part, from which it will only return grudgingly after years away.

This might not be why Stephen Jennings spoke. He seemed genuinely concerned about the human cost of this inequality, and the break in the compact we were supposed to have in capitalism – that thanks to our health and education systems everyone got a fair shake. That no longer seems as true as it once did, and Jennings correctly draws a line between that and Brexit, and Donald Trump and Nice. But the beauty of capitalism is meant to be the way everyone competes for their piece. If the market system which they believe most efficiently redistributes the cake breaks down, then the entire system is threatened. That appears to be Jennings’ real fear, and it is one even the most wealthy should share. Nothing is a perfect store of value if the civil society which protects it disintegrates.

In a world which can appear as if it’s rapidly spinning off its axis, New Zealand has a shot at remaining an oasis of relative calm and prosperity, and by swiftly addressing issues as they arise we might potentially blunt the worst of the impacts of what feels like a gathering global storm. To do that requires an adjustment of policy and thinking to match these radically changed circumstances. The steadfast maintenance that minor adjustments will do the job isn’t good enough for Jennings, and should more join his chorus then it might prove that the remarkably steadfast grip John Key has maintained on the political narrative finally begins to slip.

Sign up to the Spinoff mailing list and win!

Not knowing what's happening on the Spinoff is a true nightmare. Keep your dreams sweet by signing up to our weekly newsletter and keep up to date with everything happening on The Spinoff

Email address:

Leave this field empty if you're human:

Follow The Spinoff

The Spinoff Longform Fund is dedicated to
facilitating investigative journalism. Our focus is on
supporting in-depth reporting on important New Zealand
stories. Your donation will help us sustain this most
resource-intensive form of journalism, ensuring that the
most complex and important stories still get told.

The Spinoff is subject to NZ Press Council procedures. A complaint must first be directed in writing, within one month of publication, to info@thespinoff.co.nz. If not satisfied with the response, the complaint may be referred to the online complaint form at www.presscouncil.org.nz along with a link to the relevant story and all correspondence with the publication.